Many new professional services businesses price themselves below market as a way to bring in business. There is some logic to this practice. Since you lack client references and a demonstrated track record, there is more risk for the initial few clients.

But, pretty soon, as business increases, your overhead does too. You may want to hire a bookkeeper, get some administrative help, find a bigger office . . . . The list goes on. Soon, you find yourself with a growing business but not with growing profits. What's the answer? Should you raise prices?

The Costs of Being Under-Priced

Your current clients, the ones who made this success possible, have put a value on your services—a value that you initially set for them. So, if you raise your prices by 20 to 30 percent, even though it's closer to what your competitors charge, your clients may think, "Wow, that's expensive!" On the other hand, if you don't raise prices, you are working for nothing.

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